How much Interest to claim for if property rented for half the year?

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missey1977

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Hi all,
My friend has a property that was rented from Aug 08 - Dec 08. Can he claim for the interest on his mortgage paid for the entire year (Jan 08 - Dec 08), or only the proportional amount for Aug-Dec?

Thanks.
 
Was this a first time rental? If so, then my understanding is they can only claim for the interest at a proportional rate (ie- 5 months)

If it had been rented before & they were holding out to rent at the same amount, then I believe they could clain for the whole year (they would have to prove it was available for the whole period, if asked).

BTW-not an accountant, just my understanding !! Also, they will hae to have the property registered with the PRTB during 2008.
 
This was a first time rental. He was living in the property as his primary residence until July 08. I have to say i thought the same as you that one could only claim for part of the year, however he seems adamant that he can claim for his whole year of interest payments.

I think he is registered with the PRTB yes. (I know you have to be to claim for your interest payments).

If anyone else has thoughts/advise on this i would be very happy to hear them.
 
I found the relevant section from the revenue, but it doesn't seem that clear to me.... Anyone else understand this better?? Thanks!

What is the position with regard to interest paid on borrowings?

Certain restrictions were introduced on the deductibility of interest on borrowed money used on or after 23/4/1998, in the construction, purchase, or repair of rented residential premises in the State, or 7/5/1998 in the case of foreign residential premises. However, the relief for interest on borrowed money was restored for such interest accruing on or after 1 January 2002. There were some transitional arrangements in place in the interim period.
Relief is disallowed as respects interest accruing on or after 6 February 2003 where the let premises was purchased from the spouse of the person chargeable in respect of the rental income. However, the disallowance of interest relief does not apply in the case of legally separated or divorced persons.
Where a loan has been used to purchase, improve or repair a rented residential property and the interest on the loan accrues on or after 7 April 2009 (Budget Day), only 75% of the interest on the loan can be deducted as a rental expense instead of the normal 100%. For the purposes of the restriction, the interest is treated as accruing on a daily basis. The date the loan is taken out is not relevant.
The restriction does not apply to loans taken out to finance non-residential property and the full amount of interest continues to be deductible in such cases. In the case of mixed residential and non-residential properties interest should be apportioned on a just and reasonable basis before the restriction is applied to the residential part of the interest.
For the year 2006 onwards interest is not deductible where the person making the claim has not complied with the registration requirements of the Private Residential Tenancies Board in relation to any tenancies in the particular premises. All queries relating to the registration requirements/process should be directed to the Private Residential Tenancies Board, 2nd Floor, O'Connell Bridge House, D'Olier Street, Dublin 2. Telephone: +353 1 6350600 10:00 am to 1:00 p.m. and 2:00 p.m. to 4:00 p.m. Monday to Friday. Fax: + 353 1 6350601 or www.prtb.ie[broken link removed]
Interest on any loan, or part of a loan, that is used to pay stamp duty, legal fees and other expenses incurred in relation to the purchase, improvement or repair of a premises is not deductible. Only interest relating to the actual purchase, improvement or repair costs is deductible.
 
A deduction is not allowed for the mortgage interest relating to the part of the year prior to the 1st letting of the property. It would be a pre letting expense and disallowed. See section from Revenue leaflet IT 70:

What expenses cannot be claimed for?

  • Pre-letting expenses, i.e. expenses incurred prior to the date on which the premises was first let apart from auctioneer's letting fees, advertising fees and legal expenses incurred on first lettings.
 
Does that definitely apply to Interest as well though. Or is Interest treated differently to other Expenses.

I read that section of the leaflet and thought maybe expenses refered specifically to fees, repairs etc...


Also there is this section in the Revenue leaflet, which maybe infers that interest for the entire year can be claimed??:

How is profit/loss rent calculated?

The rental profit or loss is calculated by reference to the rent or total receipts to which the person becomes entitled to in any tax year (as opposed to the period to which the income relates).


What does anyone think??
 
Can i just ask how you know that? Am not being cheeky, it's just that my friend (this really is a friend, not myself in the 3rd person) seems sure that there is.

And thanks for replying, and helping out.
 
The reason is that it is a pre-letting expense and not one of the pre-letting expense that Revenue speciifically allow e.g. auctioneers fees. Your friend was occupying the house as his/her sole residence up until July 2008 so there is no reason that a deduction should be avilable for the mortgage interest relating to that period when calculating rental profit for the year. Why should there be a deduction in a rental computation for mortgage interest incurred prior to 1st letting? Also your friend was quite possibly getting Tax Releif at Source on the mortgage interest when occupying the property (this should be cancelled from when the property was let).
 
Thanks both, that all makes sense. I agreed with you from the start, but was trying to convince my friend and just couldn't find the documentation to do so. He says he's now convinced :)

Cheers!
 
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